Rare Stake: Can Wyoming help serve world's hunger for rare earth minerals?

The world wants what Wyoming has; the 17 once obscure scientific curiosities found at the bottom of the periodic table. With names like europium, terbium and dysprosium, these chemically complex rare-earth elements have become essential in everything from wind turbines to smart phones, from flat-screen TVs to compact fluorescent light bulbs.

Maybe, just maybe, this is a first date that might lead to something. Certainly, Rare Element Resources thinks it will. With plans for $400 million in infrastructure in and near the towns of Sundance and Upton, the mining company specializing in rare earth metals believes it has a rock-star project to compete with China’s near monopoly on these useful substances.

The deposit, nine miles northwest of Sundance on the fringes of the Black Hills, has rare earth in spades. It is especially blessed with the heaviest of the rare earths, the ones projected to be in highest demand during coming years for use in high-performance magnets and compact fluorescents, say company officials. One of the elements, dysprosium – which allows magnets to retain their effectiveness up to 250 degrees Fahrenheit, compared to 80 to 100 degrees for ordinary iron magnets – has fetched up to $1.2 million per ton in the last year. Analysts don’t expect that to last, but they do expect it to stay close to $300,000 to $400,000 a ton.

Jon Hykawy, clean technologies and materials analyst with Toronto-based Byron Capital Markets, says he expects the rare earth elements used in high-performance magnets will stay in high demand in coming years, especially as China, India and other populous countries seek to improve their transportation with highly efficient electric and hybrid cars.

Rare earth mining, however, isn’t likely to join the ranks of coal, natural gas and oil as Wyoming’s leading economic engines. The global market for rare earth minerals altogether runs only 130,000 to 140,000 tons annually, says Hykawy. The market has limits and, for some minerals, price sensitivities. Substitutes for lanthanum, for example, a rare earth element used in oil refining, can be used when prices climb.

No other company is believed to be in the hunt for rare earth minerals in Wyoming, but hundreds are at work around the globe. The handful left standing are likely to be those with the best minerals and the best supporting infrastructure – and the first to get on line, establishing relationships with manufacturers. In this happy intersection, Rare Element Resources believes it has great opportunity.

‘Rare’ opportunity to diversify

Legislators also see opportunity. This isn’t energy, Wyoming’s usual meal ticket. As economic diversification has become the Holy Grail, state legislators this year appropriated $200,000 to the Wyoming State Geological Survey to analyze prospective rare earth deposits, to be completed by June 1, 2013. No statewide comprehensive survey has ever been done, but it’s widely known that the rare earth elements are often found in higher concentrations with the radioactive elements of uranium and thorium. Wyoming has plenty of both.

“We really have a jump on things and have lots of ideas about where we’re going to be collecting samples,” says Wayne Sutherland, gemstones, metals, and economic geology specialist with the Wyoming State Geological Survey. See sidebar at bottom. In addition, the Legislature this past winter carved out $700,000 for the University of Wyoming College of Engineering to conduct research into rare-earth materials. Also in the name of adding value to Wyoming’s natural resources, the Legislature appropriated another $100,000 to the university’s School of Energy Resources to evaluate the feasibility of using soda ash to manufacture glass and glass products in Wyoming.

“This is just seed money, to get people thinking about the future,” says one of the legislative sponsors, Rep. Donald Burkhart Jr., (R-Rawlins). “It puts Wyoming in a little different direction. Wyoming has always been an energy exporter. This will help allow us to produce something a little different than energy. And if the University of Wyoming comes up with a good way to process materials, more economical and novel, I would like to see materials from (elsewhere) come here for processing,” says Burkhart, who graduated from college in 1970 with a degree in physics from John Carroll University. State Senate President Jim Anderson, (R-Glenrock), similarly wants Wyoming to add value and diversity in processing. “Some of us feel that in light of this new discovery that we should look at ways Wyoming can add to its value through development of those rare earths,” he says. “This is not going to happen overnight,” he adds. “But we have a lot of soda ash, which is used in making glass, and also silicon. Now we have rare earth elements. We also have low-cost energy. It’s conceivable we could become a leader in the world in making silicon and glass, magnets, and other things.”

Rare earth’s international market

Wyoming isn’t the only place with rare-earth deposits, however. Hundreds of companies have begun hunting for deposits since China, which produces 97 percent of the world’s rare earth elements, announced it would slash exports. Prices shot upward. For example, cerium, which is used in polishing flat-screen televisions, rose from $6 a pound in 2008 to $77 a pound before dropping back to $25 a pound last fall.

As the world’s biggest electronics factory, China itself uses 60 to 70 percent of the rare earth elements it mines. Most of our televisions and computers are made there, as are the millions of General Electric fluorescent light bulbs. Factories based in China get first dibs on the rare-earth resources.

This dependence on China’s near monopoly causes heartburn in Americans who are aware of the rare earth elements used in the manufacture of night-vision goggles, the latest generation of F-35 fighter jets, and just about every piece of high-tech equipment of the U.S. military. Global demand for rare earth elements has tripled in the last decade. As of 2010, global demand was 136,000 tons, according to a 2011 report by Marc Humphries of the Congressional Research Service. Demand is projected to grow to 185,000 tons annually by 2015.

China has only 30 percent of the world’s known economically recoverable deposits of rare earths. A representative of China at a recent conference in Washington D.C. also called on other countries to step up their own production. In time, China sees itself importing rare earths, just like it does oil. Just a decade ago, the country also exported oil. It expects to run out of a key rare earth mineral, dysprosium, within 15 years. (See China sidebar). Wyoming has it.

Wyoming operations

Rare Element Resources intends to be part of this evolving story with Wyoming’s untapped resources. The company is headquartered in Colorado at the edge of the foothills, nine miles west of downtown Denver. It concerns itself with both gold and rare earth elements. Both are found in the company’s 2,400 acres of mining claims on the Black Hills National Forest. However, rare earth elements are driving this proposal. Gold might lie in the future, but it’s not in current plans. The company plans a 500-foot deep open-pit quarry at its Bear Lodge project near Sundance. There, the ore would be pulverized to the consistency of sand. It expects to have a 900-acre footprint for mining operations. Waste rock would be deposited on land that will become private if a 640-acre state school trust parcel is obtained from Wyoming in a pending land exchange.

During the first 19 years, the company envisions producing 11,500 tons of rare earth oxides. Current U.S. demand is 15,000 to 18,000 tons. Planning for the site began in 2004, but George G. Byers, the company’s Rare Element Resource’s vice president for government and community relations, says continued exploratory drilling last year heightened the excitement. It is, he says, “perhaps the second best heavy rare earth deposit” in the Western Hemisphere. An ore body in Canada’s Northwest Territories is considered even better, but the remote location would impose sharply higher operating costs, according to Byers.

The Wyoming deposit is within two miles of a paved road and nine miles from Interstate 90. Upton, where the company plans a processing plant along the BNSF Railway line, is just 40 miles away.

In addition, the Sundance and Upton communities have electricians, diesel mechanics and other skilled labor all too ready to swap existing 100-mile commutes to jobs in the Gillette Powder River Basin coal fields for local jobs, says Byers. Some 80 jobs will be available at the mine, and another 70 at the separating mill in Upton. The company also thinks it has generally friendly regulatory environment in Wyoming. In a 2011 report, the Fraser Institute, a Canadian public policy research organization, found Wyoming the fourth friendliest jurisdiction for mining, behind two Canadian provinces and Finland. The Wyoming Department of Environmental Quality would be charged with regulatory overview of what is, by all accounts, a challenging and somewhat risky operation of mining and processing.

Winnowing the field

Analysts at recent conferences have predicted that the hundreds of companies now traipsing around the planet will dwindle to just six to eight within the next few years.

Jack Lifton, a Detroit-based expert in rare earth metals, likens the 400 identified deposits of rare earth elements and 259 companies trying to develop them to aspiring rock stars and movie stars. Most have talent of some sort, but just one in a million will make it.

“It’s the same thing with rare earth,” says Lifton, a consultant who works for the Denver-based company two days a month. “You can find all the deposits you want, but they need to be the right kind of resources. Rare Element Resources has the right kind. They are of the right kind, and they are of a good grade, and they are so much easier to process than the stuff from (Mountain Pass) California.”

Rare Element Resources says it has $56 million in cash and no debt, and market capitalization of $270 million, positioning itself well to move forward as it checks off the laundry list of to-dos: a feasibility study, now updated, which shows great promise, along with financial documents required of mining stock exchanges. The company expects to apply to the U.S. Forest Service for a permit this year. It has already done baseline studies for wildlife, water, traffic and other impacts. It also needs a permit from the Wyoming Department of Environmental Quality. A permit may also be needed from the Nuclear Regulatory Commission. The company hopes to have these as well as local permits in hand by early to mid 2014, enabling production to begin in 2015.

However, additional financing will be necessary before the company moves into full development. Anne Hite, director of investor relations for Rare Element Resources, says the company has several options for raising money, and it will be a challenge – as it has for other companies. “But it’s certainly not insurmountable, and our goal is to do it in a way to avoid dilution to our shareholders,” she says.

A tedious process

As an extension of the gold-laden Black Hills, the Bear Lodge Mountains have been picked over since the 1880s. Interest in the current claims can be traced to the 1940s and the search for uranium. Later prospecting keyed in on the prospects of copper. In the 1950s, U.S. Bureau of Mines drilling in the Bear Lodge Mountains revealed rare earth mineralization. At the time, rare earth elements were considered a scientific curiosity, with little or no value. New uses for rare earths were found in the 1970s and 1980s, accelerating in the 1990s. Various rare earth elements are used not only in catalytic converters but also as agents in oil refining. Many conduct electricity well.

The drive to miniaturize electronics has been a boon to rare earth mining. Cell phones, computers and tablets are loaded with them. The ability to whisk through pages by plucking lightly on the screen of a cell phone or tablet is because of a rare earth element.

“They have a staggering wide number of applications,” says Dr. Alexander King, director of the Ames Laboratory at Iowa State University, one of the nation’s preeminent materials laboratories. Materials engineers have been trying to find substitute processes and materials to avoid full dependency on rare earths. They’ve achieved only small successes.

King sees a continued market for rare earths well into the future. But some of the rare earths are more valuable than others. That’s where the Bear Lodge deposit shines. It has dysprosium, neodymium, praseodymium and terbium, all of them used for high-performance magnets used in cars, disc drives and in the nacelles of giant wind generators. As normal iron magnets heat, their magnetic qualities tend to degrade. Dysprosium resists that degradation.

“It is a very, very important element, especially for these clean-energy applications,” says King.

A Toyota Prius, for example, has 30 pounds of rare earth elements, including 10 pounds of lanthanum, which allows the battery to pack more power in a smaller space. Even ordinary cars have rare-earths. For example, they are used in car motors, including the motors used to raise or lower your windows. Normal magnets would be much larger, and your car door would have to be wider. Europium and terbium, both found at the Bear Lodge site, are used in compact fluorescent light bulbs.

Processing rare earth elements is challenging. Chemically, they are almost identical in their atomic composition. They are far more common than gold, but gold concentrates naturally and further separation from ore is a relatively easy process. The trick with rare earths is to wean them from one another. To do this requires exacting, tedious processes involving acid. Ordinarily, the same process is used again and again, then again and again.

“It’s a very slow process. It takes a lot of steps,” says King. “It usually takes a lot of acid, which is environmentally challenging to deal with, and once you have it all separated, you still have to extract the rare earth metal from the solution, which is usually done by electro-magnetic techniques. That is an energy-intensive process, and it has a certain amount of environmental risk to it.”

Rare Element Resources estimates it will need four railroad tanker cars each day of boric acid and soda ash at its processing plant targeted for Upton. Wyoming’s low-cost electricity is an advantage. If the ore has radioactive elements, such as thorium and uranium, says King, “You need to separate them out. Separating them out is a well-established technology, but it’s not an easy technology.”

Environmentalists don’t immediately see red-flag issues, but they are cautious.

“Anytime you have a big open pit mine with potential for radioactive contamination, we have a concern,” says Erik Molvar, executive director of the Laramie-based Biodiversity Conservation Alliance. “When you have rare earth mining, you have some of the minerals that do have radioactivity coming along with the rare earth elements, so it’s important that you don’t poison streams.”

He says: “We haven’t been heavily engaged in this, but we will be engaged in this issue moving forward.”

Rare Element Resources describes radioactivity at the proposed Bear Lodge operations as consistent with background levels in the area, with no commercial-grade deposits of radioactive materials in the mining area. Just the same, the company two years ago decided to build the tailings facility at Upton to standards specified by the Nuclear Regulatory Commission for uranium mill tailings.

“Like every rare earth, we have a little bit of thorium and a little bit of uranium, but nothing at levels that constitute a human safety issue,” says Byers.

The most immediate competition to the Wyoming ores is from a quarry at Mountain Pass, California, located 60 miles southwest of Las Vegas. It operated from the 1980s until 2002 when its owners, Unocal, closed it down because of an inability to compete with the lower-cost rare earths from China and because of environmental considerations. Later spun off to private investors, Denver-based Molycorp has reopened the quarry but it exports the materials to China for processing. Mining experts say a new process being assembled will require less energy and will use safer materials.

For its separation process, Rare Element Resources is working with the  Australian Nuclear Science and Technology Organisation to develop techniques specific to the elements found at the Bear Lodge location. Mining companies often patent their processes, although sometimes companies just choose to be secretive, says Iowa State’s King.

Rare Element Resources is betting than it can deliver the prized materials at a lower price than other operators. But with China cutting exports, there’s also a time imperative.

“The way I see the market at the present time, he who gets into the market first wins the game,” says Sutherland, from the Wyoming State Geological Survey. “Nobody can predict what the demand will be 10 years from now. It may be stable, with steady or slow growth, or the demand may skyrocket beyond what we can imagine at the present time.”

(Banner photo courtesy of NASA)

Allen Best is a long-time journalist based in Colorado. He can be found at Mountain Town News.

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